Consumers will spend less this holiday season. With high inflation rates, the costs of essential goods rising, and wages staying stagnant, it could be a lackluster holiday season. Adding to the pain, retailers are still recovering from inventory issues caused by the congestion and closure at the ports during the pandemic, which left them with too much product that isn’t aligned with what customers want now.
Therefore, experts expect a holiday season of high discounts and a barrage of after-Christmas returns, leaving retailers facing a real logistical nightmare. How will they attract customers, reduce inventory, and prepare for higher-than-normal return rates?
“Inflation is the next wave of the pandemic, and consumers are being more cost-conscious, but at the same time, retailers have too much old inventory, not in the right place or right variety, and they need to liquidate it, so we have this convergence of two competing ideas,” said Bill Thayer, CEO of Fillogic, the leading provider of local market logistics. “To solve it, retailers will have to provide deep discounts to help reduce inventory and get shoppers in stores.”
Experts agree. Cowen analyst John Kernan says there is more inventory than demand, which will lead to promotions everywhere. Companies are already offering Black Friday-level discounts, and Amazon added a second Prime Day to the calendar this year. Adobe predicts all-time-high discounts on electronics, toys, and computers.
While this will work to get shoppers in stores or purchasing online, there is another problem looming over retailers’ heads – the expected increase in holiday returns.
“Consumers changed the way they shopped during the pandemic, and these new patterns are here to stay,” Thayer said. “Unfortunately, that means more returns coming through retailers’ doors than ever before.
“During the pandemic, retailers made returning online sales to stores super easy for the buyer. They did this for a couple of reasons. 1, it got people in the physical store, which opened them up to more impulse purchases. And 2, it created loyal customers. But now retailers are feeling the pinch, and with the labor, costs, and logistics of returns, they’re starting to pull back on those easy return policies, much to shoppers’ dismay.”
Typically speaking, returns, or reverse logistics, is expensive and often results in lost revenue for retailers. But there are ways to spin returns into a revenue-builder. Considering that nearly 21% of all items bought online are returned (according to the National Retail Federation), making them less costly will greatly benefit retailers’ bottom line.
Here are 3 ways that retailers can successfully navigate reverse logistics.
Retailers can prepare for the upcoming season of returns by simplifying the process, giving people what they want and relying on expert staff and technology. Invesp, a conversion rate optimization company, found that 62% of shoppers are more likely to shop at an online retailer that allows for in-store returns and that 92% of consumers surveyed said that they will buy again if the return process is easy. This also increases store traffic, boosting brick-and-mortar sales, while ensuring the returns don’t hurt the bottom line by getting that product back on store shelves in the areas where it will sell. Additionally, an effective returns process helps retailers reduce or improve their initial inventory buy because they can quickly resell items brought back.
“The thing that makes returns possible is the technology, the visibility, the network, and the infrastructure – without it all working cohesively together, returns will fall short or end up costing time and money,” Thayer said. “We see this a lot, and that’s why retailers tend to overlook returns or see them as a lost cause, but it just takes having the right processes or partnering with the expertise to turn reverse logistics into a profit sector. So, it’s the flexibility, the technology, and the access to capacity – capacity within the walls and within the wheels, and we have the technology to be able to connect it all and it's all done from places where most retailers do their business. No one right now looks at returns as an investment and an opportunity, but if we can change that mindset, things won’t seem so doom and gloom.”